Shell wins Mexican LNG contract

Debra Beachy

Petroleum News contributing writer

A Royal Dutch/Shell Group subsidiary has won a contract to supply Mexico’s government-owned power utility with 500 million cubic feet a day of natural gas from a liquefied natural gas plant planned for the port of Altamira, the Federal Electricity Commission, Comision Federal de Electricidad, said in a press release posted on its web site Sept. 12.

The utility, known as CFE, said the Shell subsidiary Gas del Litoral was the only one of 16 companies that bought bidding rules to submit a bid as well as a technical proposal. Shell’s bid was for a price of 17.9 cents per million British thermal units. The CFE said the bid was within the limit it had set of 18.5 cents per million Btu. Gas deliveries are set to start Sept. 30, 2006, CFE said.

At least one analyst said the contract was very significant because it paves the way for Shell’s plans to build an LNG terminal and regasification plant at Altamira in the state of Tamaulipas on Mexico’s Gulf Coast.

“This is huge,” said George Baker, who owns the Houston-based consulting firm Mexico Energy Intelligence. “Shell has been working on this for two years,” he said. Initially, the bidding was to be handled by the state-owned oil monopoly Petroleos Mexicanos, Pemex, unit of Pemex Gas, but later was switched to CFE, Baker said.

The LNG plant at Altamira would be Mexico’s first, and it would be able to supply gas through pipelines to power plants in the states of Tamauplias, Veracruz and San Luis Potosi, the CFE said. The Mexican utility said the contract was “very important because it is the first time a privately owned company will be supplying the public sector with natural gas.”

Besides the LNG terminal and regasification plant at Altamira on Mexico's East Coast, several LNG receiving facilities are proposed for Baja California on Mexico's West Coast. One of the projects, Sempra Energy's Costa Azul, has received all of its major permits and construction expected to begin early next year. (See stories in this issue and Sept. 14 issue of Petroleum News.)